Are the golden years over for gold?
With prominent hedge fund managers such as George Soros selling large quantities of gold and the price down about 16.5 percent from 2011′s all-time peak near $1,924, some experts think gold‘s best days could be tarnished by the world’s nascent economic recovery.
“We have been concerned about gold and silver prices for some time and the recent loss of momentum has concerned us even more,” said Citigroup analyst Jon Bergtheil in a report. He says it’s possible that the 12-year bull market in gold and silver has ended.
“If gold is currently peaking, it may have a long way to go down in terms of dollars per ounce as well as in the matter of the extended time frame,” he said.
So investors, who bought gold thinking it would always be a winner, could be disappointed by a slump much worse than gold‘s slide to $1,604 an ounce Tuesday. The last time a bull market in gold ended in 1980, gold was a loser for more than 20 years after peaking at $850 an ounce. Gold declined to $252 and didn’t return to its $850 peak until 2008.
Bergtheil is recommending that investors who invest in mining company stocks move from what he calls the “insurance metals” to industrial metals.
The thinking is that gold and silver were purchased for protection from the financial crisis and Great Recession in 2008. And as the Federal Reserve and other central banks throughout the world attempted to resuscitate the global economy by pouring trillions of money into the system, gold has been attractive as a hedge against potential inflation from too much stimulus.
Recently, however, with some signs of recovery in China and the U.S., stocks have become increasingly attractive, and some hedge funds — which move money around as they see opportunity in different types of investments — have added stocks to portfolios while selling some gold. Bergtheil has suggested to client investors in metals to select industrial metals used for construction and industrial purposes rather than gold and silver. Platinum, a precious metal that also is used for industrial purposes, has climbed about 10 percent this year while spot gold has declined 4.25 percent.